Aviva Loses £2m Fraud Case Against Its Own Client.

Accusing a commercial insurance policyholder of fraud is too serious to be done without meeting the legal standard required.

When an insurer accuses its own policyholder of fraud, especially over a multi-million-pound claim, the burden of proof is high, and rightly so. That standard was not met in Malhotra Leisure Ltd v Aviva Insurance Ltd, a High Court decision handed down on 7 May 2025 by Deputy Judge Nigel Cooper KC.

Malhotra, a Newcastle-based property group operating care homes and hotels, suffered a significant water leak at one of its properties. While Aviva initially found no concerns, it later denied the claim accusing its client of deliberately causing the damage to trigger a fraudulent payout. In a 61-page ruling, the judge found that Aviva, represented by Clyde & Co, failed to provide a credible account of how the leak was supposedly engineered. Instead, the insurer offered multiple speculative scenarios without clear evidence pointing to any specific act or individual.

Furthermore, Aviva’s attempt to suggest financial motive fell flat. The judge noted that Malhotra had a strong balance sheet, with £7.5 million in cash reserves, £150 million in tangible assets, and turnover of around £38 million, undermining any claim of financial desperation. Ultimately, the court found the water escape was an accidental, insured event. Aviva was ordered to settle the claim in full.

This ruling is part of a broader trend we’ve observed in the Mactavish Claim Litigation Index: a growing number of high-stakes disputes are ending up in court, and insurers are increasingly on the losing side. From Covid business interruption to Russian aviation and now this example, there’s a clear question for the industry: Have insurers pushed things too far? And what does this mean for policyholders who expect protection, not litigation, when things go wrong?

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David Hertzell, the former Law Commissioner responsible for the Insurance Act 2015 and former Head of the Government Taskforce on Insurance Fraud and now Chair of Mactavish’s Dispute Resolution practice, said: “Insurance fraud is not uncommon. However, when insurers allege fraud against one of their policyholders, they must be absolutely sure of their position, both with respect to their evidence and the arguments they are raising. Fraud is a very serious allegation and mere suspicion, and speculation will not satisfy the court.”

That is now two recent cases, this one with Aviva and one with Zurich (Bellhouse v Zurich – albeit the substantive claim in that case is yet to be decided) where allegations of fraud by the policyholder seem to have run into difficulty with the Judges.

Such cases serve as pertinent reminders of the high evidential burden which has to be met in order to successfully prove allegations of fraud when it comes to declining coverage.

Mactavish Claims Litigation Index

The Mactavish Claims Litigation Index aims at tracking insurance litigation and claims performance and getting the market to focus on what really matters, the product you buy with your premiums, not just the premium itself.